Comment Text:
Applaud the CME for implementing an increase in the storage rates by $0.03c/bu per month. However, we feel an annual review that would allow for adjustment in tandem with the increase would be a more favorable option. This would be a hybrid approach, slightly different than the VSR as it wouldn't impact every delivery period. It would not only allow for the CME base rate to increase, while also adding flexibility to raise the base rate should the market warrant further adjustment.
We suggest utilizing current VSR measures of 80% of full carry to provide a monthly deliverable storage increase of 5c, and 50% of full carry to provide a monthly deliverable storage decrease of 5c (not to decrease below the 8c monthly base rate).
-We suggest using CZ/CH and SX/SF for annual observation periods as new crop value of storage would be known.
The current CME contract review process has taken 3 years to put a potential solution in place to address the lack of convergence.
The driving force behind our recommendation for a so-called hybrid approach is to allow the market to determine what storage is worth on an annual basis based off cash market conditions, ultimately creating a more dynamic marketplace to help ensure we don’t go another 3-years without convergence.
